Landlords’ are showing increasing optimism about the buy-to-let market, according to the latest landlord sentiment survey conducted by LSL Property Services plc.

The company report that 49% of landlords think now is a good time to invest in property, an increase from a year ago (47% and that only 1% of the surveyed landlords believes it is now a good time to reduce their portfolios. In fact 86% of the landlords polled are planning to maintain or expand the size of their portfolios over the next twelve months.

Growing demand for rental accommodation is the main reason for the increase in confidence. 185,600 fewer first-time buyers entered the property in the last 12 months compared to the level before the economic downturn and the vast majority are remaining in the private rental sector instead. As a result, in the past three months, 52% of landlords have seen a rise in tenant demand and 68% expect demand to grow further in the next twelve months.

David Newnes, estate agency managing director for LSL said: “Optimism among landlords is not only buoyant, but increasing. Soaring rents and climbing demand from frustrated first-time buyers are not only making buy-to-let an attractive proposition for new property investors – but are encouraging existing landlords to grow their holdings before property prices increase once more.”

Increasing rental income has improved financial security for long-term investment. The latest LSL Buy-to-Let Index showed that rents now equal their all-time high of £692 per month. As a result, landlords with mortgage finance have an average of £274 in rental income a month after mortgage payments - £3,288 per year. This means that even if interest rates increase by 3.25%, landlords’ current rental income would be big enough to absorb the increase in the cost of a tracker mortgage on the average buy-to-let property.

“Following the winter downturn, rising rental incomes are adding an increasing financial buffer for landlords. Landlords are taking a healthy sum once the mortgage has been paid each month. Many are taking the opportunity to either pay down their mortgage or expand their portfolio – or are using the opportunity to build slush funds for rainy days or future higher mortgage costs. With the Bank Rate forecast to remain below 2% until at least the end of next year, landlords can expect to see rental payments rise without facing the burden of higher mortgage payments,” said Newnes.